Special Story – Finance Bill, 2013
CA Ashok L. Sharma
Investment Allowance – Section 32AC
Objective of the Provisions
installed after 31-3-2013 but before 1st April
2015 as reduced by deduction allowed, if
Finance Minister in his speech has said that
any, as per (a) above.
to attract new investment and quicken the
implementation of the projects, investment In case ` †‡‡
allowance provision has been introduced for new year 2013-14 then no deduction will be allowed in
high value investments. He has also stated that that year. If actual cost of both the year exceeds
no large economy can become truly developed ` †‡‡
ˆ‡†‹†š
,without a roboust manufacturing sector.
deduction in respect of entire cost including cost
ˆ‡††‹
Provisions Analysed
ˆ‡†‹†š
A new section 32AC has been introduced to The above deduction is in addition to the
provide deduction to the companies engaged in depreciation allowance u/s. 32. In computing
the business of manufacture or production of any “††š§@
article or thing and invests a sum more than ` 100 for such allowance.

to mean any new plant and machinery other than The phrase "new asset" has been defined as
ship or aircraft and excludes few items of plant or discussed above. It does not include following –
any plant or machinery which before its
machinery. The deduction is allowable if company (i)
installation by the assessee was used either
acquires and installs new asset after the 31-3-2013
within or outside India by any other person;
but before 1-4-2015 and the aggregate amount of
actual cost of such plant and machinery exceeds (ii)
any plant or machinery installed in
` 100 core.
any office premises or any residential
accommodation, including accommodation
The deduction will be allowed as under:
in the nature of a guest house;
"
~
ˆ‡††‹
_
15% of the actual cost of assets acquired and " computer software;
installed after 31-3-2013 but before 1st April,
2014 if the aggregate investment exceeds (iv) any vehicle;
` 100/- core.
(v)
ship or aircraft or
"
~
ˆ‡†‹†š
_ (vi) any plant or machinery, the whole of
15% of the actual cost of assets acquired and
the actual cost of which is allowed as
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The Chamber's Journal March 2013
73
Investment Allowance – Section 32AC
deduction (whether by way of depreciation
or otherwise) in computing the income
¤\
of business or profession” of any previous
year.
profession. The income will be of the previous
year in which such asset is sold or otherwise
transferred; this will be in addition to the
taxability of gains arising on account of transfer
of such new asset.
To restrict the transfer plant or machinery,
it is provided that if any new asset acquired
and installed, is sold or otherwise transferred
*
installation, the amount of deduction allowed,
in respect of such new asset shall be deemed
to be the income of the assessee chargeable
In case new asset is sold or otherwise transferred
in connection with the amalgamation or
demerger within a period of 5 years from the
date of installation, the provision for withdrawal
of the allowance will not apply. However, the
amalgamated company or resulting company
would have to continue to hold the new asset for
the balance period of 5 years.
Comparison between old Provisions of Investment Allowance and Proposed Provisions
Sr.
No.
Section 32A
Section 32AC
1
An assessee was granted deduction of 25% / 20% on the Investment allowance is allowable
actual cost of plant and machinery, ships and aircraft.
only on plant and machinery and it
excludes ships and aircrafts.
2
There was no minimum threshold for the actual cost for Minimum investment of ` 100 crore in
grant of investment allowance.
plant and machinery is required.
3
Deduction was to be allowed in respect of the previous year To claim deduction u/s. 32AC,
in which ship or aircraft was acquired or the machinery or acquisition and installation must be in
plant was installed or if the ship, aircraft, machinery or plant *
4
New machinery or plant included machinery or plant which Deduction is not allowed on plant or
before its installation by the assessee was used outside machinery used outside India.
India by any other person. This was again subject to certain
conditions.
5
Deduction was allowable subject to creation of reserve Requirement of creation of reserve and
and use of such reserve for acquisition of, new plant or its utilisation is not there under the
machinery before 10 years.
proposed section.
6
The deduction was withdrawn if the plant or machinery was
sold or otherwise transferred to any person before the period
of 8 years or the assessee did not utilise the investment
allowance reserve for purchase of plant and machinery
or if out of investment allowance reserve any amount is
distributed as dividend.
7
Under the provisions of investment allowance there was a No such condition of user is there
condition that plant or machinery be wholly used for the under the section.
purpose of business.
8
Unabsorbed investment allowance was to be c/f under Unabsorbed Investment Allowance is
separate provisions.
part of business Loss.
74
The deduction granted becomes
taxable if the new asset is transferred
within 5 years from the date of
installation.
The Chamber's Journal March 2013
SS-V-54